Mississippi tries to expand consumer choice with direct shipping license

In a sign of the times, Mississippi recognizes it cannot supply all the products that residents desire yet looks to tax modern direct sales at an unjustifiable level.

Mississippi legislation to allow in-state consumers greater choice, by way of direct alcohol shipping was once again denied in the Senate, having been successfully passed in the House, with a 75% support rate. Yes, 75%. Still, despite the overwhelming support by the House, the Senate let the bill die. I believe this is because legislators in the Senate felt protecting a single sales channel was more important than the basic rights of the state’s voters. What really was at play were a couple of issues:

• The state was opening to self-distribution (much like is successfully used in California, Washington, Oregon and other progressive states) where the retailer can buy direct from the producer.

• By allowing in-state retailers this privilege, the state would have had to allow out-of-state retailers the same privilege.

What was outrageous however, was the tax that the state wanted on the sales. An additional 15.5% on top of the state sales tax of 7%.

For those that don’t know, in Mississippi, the state is the wholesaler. Mississippi statute grants the Department of Revenue the sole right to import and sell wines containing greater than 5% alcohol by weight and distilled spirits containing greater than 4% alcohol by weight within the state. They import, store, and sell the products. They stock 3,700 SKUs with an additional 11,000 on special order.

What I believe the state was trying to do with this 15.5% tax was recoup the wholesale margin, of 27.5%, by adding 15.5% (they did start with an ask of 34%) to the retail price. The state's normal 27.5% margin would be on the price they purchased wine at. Those margins may be justifiable if they are buying, storing, and distributing products, but in the case of direct sales, they are doing none of the work, yet expect to make the same margin on these sales that they never touch.

There is also an existing health and welfare tax in Mississippi of 3% on the sale of alcohol products – that I could get behind, spreading the cost of all support services over all buyers of alcohol products.

Then let’s not forget there is an excise gallonage tax as well.

It almost feels criminal the level of tax being suggested by the state on their residents and should be a focus when bills are introduced in the future.

When reviewing the legislation, it was good to see that Mississippi Package Retailer permit holders would be able to obtain a direct shippers' permit to sell products in the state that are not already available from the state wholesaler. The state clearly recognizes this would allow retailers to offer a wider selection of products to consumers, without the state having to fully expand what they keep on their books and store in inventory, as extra inventory is a considerable expense.

Mississippi has an advantage as they are one of the last states in the US to modernize, so theoretically, they should not make all the mistakes other states have made and continue to make. The US has one of the most restrictive structures in the world since its failed ban on alcohol in the 1930’s and has been slowly making changes by way of litigation, legislation, and education to modernize the industry. Mississippi has the advantage of looking at what works in other states and jump ahead in the modernization of their sales, just like Kentucky did recently. There is no need to follow on the failures coming from a post prohibition structure. They get to set a structure for a modern digital age and can see right through the fake data that has been presented to other states about how the whole system will collapse with change, as time has shown when looking at historical objections. Mississippi does not need to reinvent the wheel.

Normally you would see the wholesale associations objecting to direct sales on the obscure claims of loss of jobs, providing greater access to minors, failure to collect taxes, and their other false claims ad nauseam. However, the wholesale channel in this case is the state itself. The wholesale channel is discovering that their stubbornness to allow the market to evolve from the current structure is leading to a shrinking of the overall market.

The concept of expanding a three-channel system in this digital age makes a lot of sense. It is a shame the current incumbent Senate legislators in Mississippi fail to recognize the desire of their residents. The package store owners are on record saying they did not like this legislation, however there was no mention of what the two million legal drinking adults in the state thought, or what the 11 bonded state wineries thought. Overall, the legislators only took the opinions of the 732 package store owners' (probably less than this) into account. Talk about focusing attention on a minority of your constituents.

It really is time for change and open competition as this will lead to expanded customer choice, more competitive pricing, an expanded market, and an increase in employment in the agricultural and hospitality industries that generates more tax income for the state by way of sales, excise and ultimately income tax.

It was a good attempt, but the state should seek more reliable input to the process from those that know and understand both the craft producers and consumer needs.